Standard Motor Products announces Q3 2009 results

Jan. 1, 2020
Consolidated net sales for the third quarter of 2009 were $205.6 million, compared to consolidated net sales of $202.9 million during the comparable quarter in 2008.

Standard Motor Products , an automotive replacement parts manufacturer and distributor, reported financial results for the three months and nine months ended September 30, 2009.

Consolidated net sales for the third quarter of 2009 were $205.6 million, compared to consolidated net sales of $202.9 million during the comparable quarter in 2008. Earnings from continuing operations for the third quarter of 2009 were $4.7 million or 25 cents per diluted share, compared to earnings of $397 thousand or 2 cents per diluted share in the third quarter of 2008. Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the third quarter of 2009 were $6.6 million or 35 cents per diluted share, compared to earnings in the comparable quarter in 2008 of $499 thousand or 3 cents per diluted share. (Though the 2008 figure would have been 13 cents per share with a normalized 40% tax rate).

Consolidated net sales for the nine month period ended September 30, 2009 were $575.3 million, compared to consolidated net sales of $626.4 million during the comparable period in 2008. Earnings from continuing operations for the nine month period ended September 30, 2009 were $11.1 million or 59 cents per diluted share, compared to $13 million or 70 cents per diluted share in the comparable period of 2008. Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the nine months ended 2009 and 2008 were $13.1 million or 70 cents per diluted share and $3.5 million or 19 cents per diluted share, respectively.

Cash flow generated from operating activities increased by $28 million in the third quarter 2009 and $97 million over the first nine months of this year. Total debt has been reduced by $119 million to $111 million at September 30, 2009 compared to $230 million at September 2008.

SMP also announced that it is engaged in exploratory discussions with the managers of its European business regarding their interest in acquiring the business via a management buy-out. Proposed terms of a transaction would include the sale of the European distribution business for pounds Sterling 1.8 million ($2.9 million) in cash and a promissory note and approximately pounds Sterling 1.8 million ($2.9 million) in assumed debt. In connection with the proposed sale, the Company would retain its manufacturing operation in Poland, certain land available for sale in the United Kingdom, and a small investment in a joint venture. If the transaction is consummated under the above terms, the estimated non-cash charges for the transaction would range from pounds Sterling 4.0 million ($6.4 million) to pounds Sterling 4.5 million ($7.2 million). (U.S. dollar equivalents are calculated at an assumed foreign currency exchange rate of GBP 1.60.)

Commenting on the results, Lawrence Sills, Standard Motor Products' Chairman and Chief Executive Officer, stated, "We are quite pleased with our third quarter results. For the first time this year, sales were ahead of the comparable quarter of 2008, despite the continued headwinds of the loss of a major account at the end of 2008, the divestiture of Blue Streak Electronics, and the fall-off of OE sales. Contributing to the sales increase was new Temperature Control business from two major retailers, and pipeline orders for Engine Management for CSK, as stores and inventories were being upgraded as part of the O'Reilly acquisition. Sales for the nine months, however, remain behind 2008 for the reasons stated above.

"Gross margin percentage edged up slightly, for the quarter and the nine months, as our facilities in Mexico continue to grow and improve. We now have over 800 people in three plants in Reynosa, a significant increase over the last two years, with plans for increased growth in 2010.

"Our people continue to do an excellent job controlling Selling, General and Administrative (SG&A) expenses. SG&A expenses were $4 million below 2008 for the quarter and $18 million below 2008 for the nine months. A key part of the saving was a reduction of over 100 salaried employees over the last 12 months, roughly 10% of the total.

"All this added up to a substantial increase in earnings per share, excluding non-operational gains and losses.

"At the same time we were able to make significant improvements in our balance sheet. In July we retired the balance of our convertible bonds. Our total debt has been reduced by over 50% in the last twelve months, from $230 million to $111 million. In all, we are extremely proud of our people for what they have been able to accomplish.

"Looking at the balance of the year, due to the seasonal nature of our Temperature Control business, we typically budget a small loss for the fourth quarter. We expect that this fourth quarter will follow historical patterns.

"Finally, as stated above, we are in exploratory discussions to sell our European distribution business to our local management team. We have concluded that this does not represent a core business for the Company. However, we intend to keep our manufacturing operation in Bialystok, Poland. With a low cost structure, and the availability of highly skilled people, we believe this operation will play a major role in our future."

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